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Streaming Music and Investment

December 20, 2012

Venture capital investment in digital music services – even streaming services – continues at a feverish pace. A surprise to some? Maybe, but some recent data points and news stories help validate this notion. USA Today wrote about the most popular YouTube videos of the year (here), and once again the majority of the videos highlighted were professionally made music videos or music themed user generated content. Interestingly, the list of all-time most viewed videos on YouTube continues to be dominated by musical content. At last check, all but 3 of the top 30 videos were music videos - and that’s not even counting “The Gummy Bear Song” (here). And we’ve written before about music’s popularity on other social media (here), including, for example, how musicians are so well represented among the most followed people on Twitter (seven of the top ten Twitter accounts currently belong to musicians).

Why does this matter?

Because we believe that this helps explain what we saw in a second piece of news (here) – that venture capital investment in the music arena shot past half a billion dollars in 2012. This shows that investors believe music occupies a unique space as a driver of digital media, and that it is poised to continue growing. Total VC investments in music industry startups so far this year totaled about $620 million, up 34% versus the prior year. Reports show (here, here, here, here) that the funding is coming not just from finance powerhouses including Sequoia Capital and Goldman Sachs, but media focused companies like Google Ventures, Amazon, and Access Industries. We also dug a little deeper, and found that services that specialize in streaming music (such as SoundCloud, Deezer, Spotify, Songza, and TuneIn) accounted for more than $300 million of the total.

So, for good reason, music continues to be a big draw. And not just for fans, but, for entrepreneurs and venture capitalists alike, looking no doubt to earn a return on their investment.